The escalating Israel-Iran conflict is raising fears of disruption and even closure of the Strait of Hormuz.
In response to ongoing hostilities from Israel, Iranian lawmaker Esmail Kowsari said on Saturday that Iran is seriously considering closing the strategic Strait of Hormuz, which sees more than 17 million barrels of crude oil pass through it every day. That is around one third of total global oil trade in this regard.
Citing Bimco, one of the world's largest shipping associations, CNBC reported on Tuesday that "some shipowners are opting to steer clear of the strategically important Strait of Hormuz, reflecting a growing sense of industry unease as the Israel-Iran conflict rages on".
Jakob Larsen, head of security at Bimco, said the Israel-Iran conflict is prompting a "modest drop" in the number of ships sailing through the area, noting the situation "has introduced an element of uncertainty".
According to an article published by Fortune on Saturday, head of FX research at Deutsche Bank George Saravelos estimated that "the worst-case scenario of a complete disruption to Iranian oil supplies and a closure of the Strait of Hormuz could send oil price above 120 U.S. dollars per barrel".
However, experts said that it is not easy for Iran to make the final decision of closing the Strait of Hormuz.
"Historically, Iran threatened to block the Strait of Hormuz several times, but it never implemented full closure of the strait. During the 1981-1988 Iran-Iraq war, Iran and Iraq exchanged attacks on oil tankers at the Strait of Hormuz, but even at that time, Iran did not completely blockade the Strait of Hormuz. After the United States unilaterally withdrew from the 2015 nuclear deal and re-imposed maximum sanctions on Iran (in 2018), Iran also threatened to close the Strait of Hormuz, but in the end, it didn't completely close the strait. Iran has again talked about closure of the strait, but it doesn't mean that Iran would implement it immediately, especially when the relevant words were from Iranian parliament members, not from Iran's foreign minister, president, or Supreme Leader," said Niu Xinchun, a professor at the China-Arab States Research Institute of Ningxia University.
"If Iran blocks the Strait of Hormuz, the global oil prices will skyrocket. Iran itself is an oil exporter, and its imports also pass through the Strait of Hormuz. So if Iran closes the Strait of Hormuz, it will surely cause chaos in the oil market and a recession in the global economy, which will then lead to dissatisfaction against Iran among countries around the world, especially the Arab states of the Gulf. So Iran has to consider these consequences, and it is not easy for Iran to make the final decision of closing the Strait of Hormuz," said Niu.
Israel-Iran conflict raises fears of disruption in Strait of Hormuz
